Synchronoss: Shares Down 42% on Weak Earnings

Expecting a slowdown in Apple Inc.'s (AAPL) iPhone sales? Don't look at Synchronoss Technologies' (SNCR) weaker than expected March quarter results for a sign, said Goldman Sachs analyst David Bailey.

The transaction management service company usually gets about one-third of its revenue from activating iPhones. However, Mr. Bailey does not think this datapoint is indicative of softening demand of iPhones but rather, a wide gap between iPhone sales and activations using Synchronoss's service.

In a note to clients Mr. Bailey wrote:

We estimate roughly 25%-30% of all iPhone units, with the vast majority of those phones originating out of the U.S. (in part due to currency translation and higher list prices abroad), are unlocked and are not registered with Apple’s U.S. wireless partner AT&T (T).

As the exclusive iPhone activation service provider for AT&T, Synchronoss would be disproportionately exposed to the gap between iPhone sales and activations.

Synchronoss's shares were down by more than 42%, to C$13.12 by 1 p.m. Wednesday.

Mr. Bailey added that he does not expect Synchronoss's results to impact Apple shares but to buy its stock on any weakness as the company looks to launch its new 3G iPhone very shortly.

Meanwhile, RBC Capital Markets analyst Mark Abramsky, who has an outperform rating on Apple, said in a note that the company is likely to beat its 10-million goal for iphone units in 2008, thanks to new distribution agreements with Voda phone, Europe's largest carrier, and Telecom Italia Mobile. These agreements "significantly expand distribution to 16 countries," Mr Abramsky said. He recently upped his iPhone outlook to 14 million in 2008 and 24 million in 2009. That is 1.7% of the global market.

Comments

[tom1234]

Where are all the nay sayers who said that 10 million iphones will not be sold by this year end ---probably looking for the lint in their navel

[investorslive]

Check out investorslive.com/blog - AAPL was due for a correction, still needs more

[investorslive]

It's www.investorslive.com/... is the site sorry it didn't link

[J Rich]

Goldman and Deutsche are the only firms bullish on Synchronoss. They are the lead underwriters from SNCR's '06 IPO! I bought SNCR at $19 p/share in large part b/c of Goldman's initial $38 target. Because of 75% revenue from Apple/AT&T it's begun to look like a $7-8 stock that somehow was trading over $20 p/share [probably in large part due to Goldman/Deutsche].

[KaptKos]

Market Makers SHOULD BE SHOT, or at least arrested for their criminal behavors